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Revising commitments : field evidence on the adjustment of prior choices

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  • Gine, Xavier
  • Goldberg, Jessica
  • Silverman, Dan
  • Yang, Dean

Abstract

The very poor in developing countries often make intertemporal choices that seem at odds with their individual self-interest. There are many possible reasons why. This paper investigates several of these reasons with a lab-in-the-field experiment in rural Malawi involving large stakes. It makes two contributions. First, it constructs a new dependent variable: revisions of prior choices regarding the allocation of future income. This allows us to directly examine intertemporal choice revision and its determinants. In particular, this dependent variable permits a novel test for the existence of self-control problems. It turns out revisions of money allocations toward the present are positively associated with measures of present-bias from an earlier baseline survey, as well as the (randomly assigned) closeness in time to the first possible date of money disbursement. Second, the paper investigates other potential determinants of revision, aside from self-control problems. It finds little evidence that revisions of money allocations toward the present are associated with spousal preferences for such revision, household shocks or the financial sophistication of respondents.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6093.

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Date of creation: 01 Jun 2012
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Handle: RePEc:wbk:wbrwps:6093

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Keywords: Economic Theory&Research; Debt Markets; Science Education; Scientific Research&Science Parks; Emerging Markets;

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References

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  1. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence from a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(2), pages 635-672, May.
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Citations

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Cited by:
  1. Elaine Liu & Juanjuan Meng & Joseph Wang, 2013. "Confucianism and Preferences: Evidence from Lab Experiments in Taiwan and China," Working Papers, Department of Economics, University of Houston 2013-199-49, Department of Economics, University of Houston.
  2. Melanie Lührmann & Marta Serra-Garcia & Joachim Winter, 2014. "The Impact of Financial Education on Adolescents' Intertemporal Choices," CESifo Working Paper Series 4925, CESifo Group Munich.
  3. Grant Graziani & Wilbert van der Klaauw & Basit Zafar, 2013. "A boost in the paycheck: survey evidence on workers’ response to the 2011 payroll tax cuts," Staff Reports, Federal Reserve Bank of New York 592, Federal Reserve Bank of New York.
  4. Dean Karlan & Aishwarya Lakshmi Ratan & Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda," Working Papers, Economic Growth Center, Yale University 1027, Economic Growth Center, Yale University.
  5. Yang, Xiaojun & Carlsson, Fredrik, 2012. "Intra-household decisions making on intertemporal choices: An experimental study in rural China," Working Papers in Economics, University of Gothenburg, Department of Economics 537, University of Gothenburg, Department of Economics.
  6. Mark Dean & Anja Sautmann, 2014. "Credit Constraints and the Measurement of Time Preferences," Working Papers 2014-1, Brown University, Department of Economics.
  7. Anett John (née Hofmann), 2014. "When Commitment Fails - Evidence from a Regular Saver Product in the Philippines," STICERD - Economic Organisation and Public Policy Discussion Papers Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 55, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  8. James Andreoni & Michael A. Kuhn & Charles Sprenger, 2013. "On Measuring Time Preferences," NBER Working Papers 19392, National Bureau of Economic Research, Inc.
  9. Dean Karlan, Aishwarya Lakshmi Ratan, Jonathan Zinman, 2013. "Savings by and for the Poor: A Research Review and Agenda-Working Paper 346," Working Papers, Center for Global Development 346, Center for Global Development.
  10. Jakiela, Pamela & Ozier, Owen, 2012. "Does Africa need a rotten Kin Theorem ? experimental evidence from village economies," Policy Research Working Paper Series 6085, The World Bank.

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